Common FPQP® Practice Test Questions and Answers;
Verified and Accurate latest 2025/2026 Edition
Operation of the closely held business correct answer
use debt, usually avoid issuing shares, often borrow personally from family members,
important to look at financial stmts, easy to mingle personal and business finances
Types of personal risk correct answer
loss of income, unemployment, disability, death, divorce, catastrophic losses,
negligence
4 components to negligence
1. existence of a legal duty
2. failure to perform a legal duty
3. actual damage is caused
4. proximate cause is established
You should first insure against possible ________ _______
catastrophic losses
The 4 Risk Management Techniques
risk avoidance
- don't do or own
risk reduction
- reduce loss
,risk retention
- self-insuring
risk transfer
- insurance
Rules of Risk Management
1. Don't risk more than you can afford to lose
2. Don't risk a lot for a little
3. Consider the odds
4 Types of Pure Risk correct answer
1. personal risk correct answer the risk that we might become unable to earn an
income
2. property risk correct answer the possibility that we may lose some of our property
3. liability risk correct answer the chance that we could accidentally cause a loss to
another person
4. failure of others correct answer we may suffer a loss because of another person's
action or inaction
A peril is
a cause of loss
A hazard is
something that increases the chance of loss
, moral hazard correct answer
people being dishonest
morale hazard correct answer
corps/institutions are careless and have a poor attitude
4 elements for an insurable risk
1. the law of large numbers must apply
2. the loss must be accidental
3. the loss must be definite and measurable
4. the loss must not be catastrophic to the insurance company
the insurance contract correct answer
1. insurable interest
- the person applying must have a personal financial loss if the covered event occurs
2. unilateral v bilateral
- unilateral, no commitment, bilateral, commitment from both
3. indemnity
- made whole, not profit
4. riders and endorsements
the 4 basic sections of an insurance policy correct answer
declarations
Verified and Accurate latest 2025/2026 Edition
Operation of the closely held business correct answer
use debt, usually avoid issuing shares, often borrow personally from family members,
important to look at financial stmts, easy to mingle personal and business finances
Types of personal risk correct answer
loss of income, unemployment, disability, death, divorce, catastrophic losses,
negligence
4 components to negligence
1. existence of a legal duty
2. failure to perform a legal duty
3. actual damage is caused
4. proximate cause is established
You should first insure against possible ________ _______
catastrophic losses
The 4 Risk Management Techniques
risk avoidance
- don't do or own
risk reduction
- reduce loss
,risk retention
- self-insuring
risk transfer
- insurance
Rules of Risk Management
1. Don't risk more than you can afford to lose
2. Don't risk a lot for a little
3. Consider the odds
4 Types of Pure Risk correct answer
1. personal risk correct answer the risk that we might become unable to earn an
income
2. property risk correct answer the possibility that we may lose some of our property
3. liability risk correct answer the chance that we could accidentally cause a loss to
another person
4. failure of others correct answer we may suffer a loss because of another person's
action or inaction
A peril is
a cause of loss
A hazard is
something that increases the chance of loss
, moral hazard correct answer
people being dishonest
morale hazard correct answer
corps/institutions are careless and have a poor attitude
4 elements for an insurable risk
1. the law of large numbers must apply
2. the loss must be accidental
3. the loss must be definite and measurable
4. the loss must not be catastrophic to the insurance company
the insurance contract correct answer
1. insurable interest
- the person applying must have a personal financial loss if the covered event occurs
2. unilateral v bilateral
- unilateral, no commitment, bilateral, commitment from both
3. indemnity
- made whole, not profit
4. riders and endorsements
the 4 basic sections of an insurance policy correct answer
declarations
